Farallon Capital Management and Och-Ziff Capital Management, two of the nation's top hedge funds, have decided to place a bet on Pay By Touch Solutions, a privately held maker of biometrics authentication technology.

Pay By Touch, a San Francisco-based company, enables shoppers to make secure payments by giving them access to their financial information by way of finger scans.

"We are thrilled to have major investments from two of the world's most respected hedge funds in this innovative financing," says Gus Spanos, executive vice president of Pay By Touch. Another hedge fund, Plainfield Asset Management, as well as a fourth one that wasn't identified, also participated in the financing. UBS Securities was the placement agent for the deal.

The total $130 million financing includes a $75 million senior secured notes deal and a $55 million offering of convertible promissory notes. The hedge funds participated only in the senior secured notes offering. However, the hedge funds also received warrants in the company, giving them some equity exposure

One of the key factors that made Pay By Touch an interesting investment is that it plans on going public.

"I don't think that an IPO 12 to 18 months from now is unreasonable," Spanos says. But aside from the potential to profit from an initial public offering, the hedge funds were probably influenced by the company's patents.

According to Steve Zellinger, general counsel at Pay By Touch, the company has 27 U.S. biometrics patents. Part of that portfolio, he says, covers technology that enables a customer to conduct financial, membership and age-verification transactions without having to carry cash, cards or checks.

Another set of patents deals with transactions such as check cashing. In other words, the company has the ability to cover substantial ground in the commercial-payments field.

For now, much of the finger-processing technology field remains concentrated in government security and physical access (such as opening doors), as well as being used to log on to computers, according to Brian Ruttenbur, a homeland security and technology analyst at Morgan Keegan.

"Pay By Touch is uniquely positioned in the transaction-processing space," Ruttenbur says.

The financing package will be used to help Pay By Touch grow. The company has more than 250 employees, and two top grocery retailers recently joined its roster of clients. For instance, Pay By Touch recently enrolled 80 stores from Piggly Wiggly. By the end of next year, the company expects to have more than 4,000 stores using its products.

Revenue has been increasing because Pay By Touch's biometrics technology saves merchants time and money, while offering convenience and safety to customers. Several stores report more customers and increased frequency of shoppers as a result of the new payment method, the company says. "They spend more money and they come more often," says Spanos.

Meanwhile, consumers can go without a wallet in to a store and opt for the method of payment they want. The customer's information is secure and encrypted, meaning the technology can address some of the growing fears over credit card and identity theft.

Last April, the company hired Davies Beller as chief financial officer. Beller was an investment banker who spent 11 years at Bear Stearns, where he was responsible for the payment industry and information technology niche, and his experience should help Pay By Touch get through the IPO process.

Two of the UBS investment bankers who conducted the negotiations with the hedge funds didn't return calls. Executives at Och-Ziff and Plainfield also didn't return calls. A Farallon spokeswoman declined to comment.

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